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The 10-year yield was essentially flat for the week. Not much to explain here as interest rates are holding steady.

With that, I want to focus on a couple of areas that I am seeing that could prove beneficial to all of our clients. I often comment that real estate investment is about creating long-term wealth and cash flow (depending on what the client’s objectives are).

Here is what I am seeing from my own perspective:

Business Owners buying buildings vs. continuing to lease – Business Owners pay for the use of their space. Through the years, those costs continue to increase as the landlord wishes to expand their own net operating income. For the owners you know whose businesses are doing well, it is extremely beneficial to analyze the benefits of buying a building vs. continuing to lease. If the owner has enough for the down payment (assume 10-15%), then the benefits of ownership often far outweigh continuing to lease.

The beauty of this is that also positions the owner to get long-term cash flow from the ownership of the building once they sell the business and move on to the next phase of life. Let me know if you have owners that would like a lease vs. buy analysis done for them.

Residential Investment Property Owners shifting to Single Tenant Net Leased Properties (e.g. a building with Burger King as the tenant) – At some point, residential investment property owners get a bit tired of handling the headaches of property management. With tenant rights increasing, additional headaches appear on the horizon. As these owners get older, their financial objectives may change from appreciation to cash flow.

With Bay Area prices so high (and cap rates low), some believe now is an opportune time to take advantage of selling high and taking some of the risk off of the table. For anyone who has been considering moving out of residential income properties (and retiring into an asset that has little to no landlord management) now may be the perfect opportunity to do so.

Exchanging out of residential investment real estate into Single Tenant Net Leased properties (if done right) can greatly reduce the client’s headaches and often create greater cash flow. The key to this is determining the client’s wish list and then matching solutions that fit. If this approach is prudent, then it is critical to find the appropriate properties which protect the client against those very headaches they wish to avoid.

There are companies out there that specialize in finding these properties (from approximately $1,000,000 on up) throughout the US. If this is an area you need support, then feel free to reach out to me; and I will connect you as appropriate.

That is it for this week. As always, feel free to give me a call with any of your strategic financing needs.

Articles of Interest:

MPA reported “Commercial real estate steady but future is uncertain say leaders. reported “These Cities Are the 10 Biggest Comeback Stories in U.S. Real Estate.

NREI reported “Store Closing Data Looks Foreboding for Malls.” This is a nice article that shows who is closing stores and also who is expanding with new stores.

See the table below for approximate interest rates.

Type Rate Fixed Term
Apartments 3.825% – 4.660% 3 to 10 year (30 yr amortization)
Commercial 4.165% – 4.960% 3 to 10 year (25 yr amortization)
Construction Call for Rate Call for Rate
SV Commercial Lending